US dealmakers are focused on integration after mid-decade M&A boom — but they stand ready to acquire.

When it comes to our Capital Confidence Barometer, we at EY often say that US corporates are “ahead of the curve.” Trends that spread across the global deal markets tend to spark with American companies first. That’s the best way to read the results of our latest semiannual survey, which depicts largely positive US corporate sentiment but signals that executives are preparing for geopolitical headwinds that have not yet checked markets worldwide.

American executives are very bullish on global economic and deal metrics; and even as trade protectionism has begun to roll out in the US, they are only slightly less positive about domestic conditions: 74% see the US M&A market improving, and nearly as many see US corporate earnings growing.

Domestic US conditions

74%

of American executives see US M&A market improving

At the same time, they are watchful of forces beyond the markets. When asked what poses the greatest near-term risk to their core business, nearly half (46%) cited regulatory and policy uncertainty, and changes to the global tax landscape as major concerns, higher than disruptive forces (34%). In other words, geopolitics are trumping technology-driven sector disturbances, the normal 2010s bugbear of corporate growth.

As for mergers and acquisitions, US corporates will transact, should the right opportunity arise. The headline number of our survey, deal intentions, finds half of US executives planning to pursue M&A in the next 12 months (51%), off just slightly from six months ago and still above the Barometer’s long-term trend.

US deal intentions

51%

of executives expect to pursue acquisitions over the next year

This Goldilocks result — not too hot, not too cold — well captures sentiment among CFOs and CDOs we advise. A prolonged US bull market, marked by historically high equity and asset valuations, may not be ready for a correction quite yet, but corporate leaders are quietly building the ark before the rains come.

This fortress-building often takes the form of deal integration — a prudent digestion phase after the M&A boom enlarged companies’ portfolios in the mid-2010s.

If we were to phrase this in terms of EY’s Capital Agenda framework, US leaders who a year or two ago were firmly in the “Investing” quadrant are now gravitating toward “Optimizing.”

These decision-makers know from experience the cost of getting it wrong: 62% tell us their last integration generated lower synergies than expected. More than half (56%) tell us they are starting integration planning earlier.

Just as it is hard to tell where markets or the news cycle are headed day to day, we can only speculate about where this corporate watchfulness will lead. It might even spur a renewed overseas focus — a sizable minority (21%), concerned about trade and tariffs, tell us they are taking another look at cross-border M&A. Yet the countries US dealmakers are targeting are relatively close to home, favoring Latin America over Europe, particularly in light of Brexit. This focus on the Western Hemisphere mirrors executives’ emphasis on optimizing their own portfolios. You might say that, at a time when trade barriers are on the rise, protectionism starts at home. And 10 years after the last financial crisis, US business leaders with long memories are keen to shore up the edifice they have built.

Every transaction has tax implications, whether it’s an acquisition, disposal, refinancing, restructuring or initial public offering. Our extensive cross-border experience, strong international network and broad commercial focus can help you identify the critical strategic tax considerations and explain them in the context of your transaction and future plans for the business.

Summary

US dealmakers are watchful yet still willing to do deals for the right opportunity. After the mid-decade M&A boom, acquirers are learning their lessons to increase synergies during integration as they move from Investing to Optimizing on the Capital Agenda. Download the full report (pdf).

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

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